US grain traders have an adage about getting too upbeat too
early on crop yield prospects: "You can't pick the homecoming queen in the
Have investors been a bit overenthusiastic this time in
their predictions for record US corn and soybean yields, with spring crops
still in their early development?
It is a question worth asking as futures on Thursday again
showed a greater willingness to consider forward movement.
"Those of us who have been around a while have seen what
happens when you take out the risk premium too soon," Don Roose, president of broker
US Commodities, told Agrimoney.com.
"The weather pattern changes and, boom, there is a change in
price direction too."
'No more rain needed'
Not, it has to be said, that price gains were huge as of
09:20 UK time (03:20 Chicago time).
But there is some idea that the US weather is not proving perfect,
if only in terms of there being too much rain rather than the usual, and
bigger, threat of too little at this time of year, when hot and dry conditions
raise jitters over looming corn pollination.
"We started the week in need of an inch of rain," said Mike
Mawdsley at Iowa-based Market 1.
"Another 2-4 inches locally overnight makes 5, 6, 7, even 8
inches plus this week already. No more is needed - but forecasts keeping
calling for more.
"One can kiss the river bottoms good bye, and where fields have
a tendency to pond, there are."
And where crops have been lost, well, "it will be difficult
to replant anything at this point".
At Martell Crop Projections, Gail Martell said: "Rainfall is turning into too much of a good thing in Midwest corn and soybeans with a wet forecast continuing."
'Shot at winning Miss
It has been enough to stop the downward march in crop corn and soybean prices.
Still, as for a serious reinjection of weather premium,
well, not yet anyway.
"Super-saturated areas of the north Midwest are small
relative to adjoining areas that have benefited more from the above-average
rains," said Richard Feltes at RJ O'Brien, who is also an advocate of another
adage, in terms of flooding, that "for every hollow, there are two hills".
And as for homecoming queens, "what we can say is that
above-average early season crop ratings, abundant June rains, prospects for a
continuation of normal-to-above-normal July precipitation and the low odds of
July heat collectively suggest that the US corn crop has a shot at winning the
Miss World contest".
Old crop outperforms
New crop corn for December rose 0.4% to $4.43 ¼ a bushel,
while November soybeans added 0.2% to $12.15 a bushel, maintaining its
unusually strong premium over its grain peer.
As for old crop lots, they outperformed a little, with ideas
on short-term demand getting a boost in corn from record US ethanol production
last week, as revealed in data on Wednesday, helping the July contract take on
0.4% to $4.43 ¼ a bushel.
Old crop soybeans gained a boost from a US export sale
unveiled on Wednesday of 140,000 tonnes of the oilseed to an unknown importer
for 2013-14 – when supplies for the current season are already running thin
That said, there are ideas that it is for shipment in late
August from the US Gulf, meaning that it could actually get fulfilled from the
first results of the 2014 harvest in the Mississippi Delta area.
Soybeans for July gained 0.3% to $14.13 a bushel.
More on exports will be known later with US weekly sales
data expected to come in 100,000 tonnes either side of zero for old crop
soybeans. (Wednesday's announcement came too late to be included.)
For new crop, export sales of 350,000-500,000 tonnes are
For corn, investors expect old crop sales of 300,000-500,000
tonnes, and for 2013-14, sales of 50,000-150,000 tonnes.
And for wheat,
sales are forecast at 350,000-500,000 tonnes for 2014-15, with the 2013-14
season of course finished for the grain, at the end of last month, on the US
'Protein levels are
For now, it was wheat which actually performed best, adding
1.1% to $5.93 ¼ a bushel in Chicago for July delivery, taking succour from talk
of rain damage to the US hard red winter wheat crop currently being harvested.
Kansas City hard red winter wheat itself gained 1.1% to
$7.36 a bushel.
Mr Feltes said that wheat is finding support on "expectations
for continued delays next week in the US hard red winter wheat harvest, where
protein levels are falling short of expectations as harvest advances northward".
Still, technical factors are seen playing a large part too,
with hedge funds having built up a large net short position over the past
month, making the market more vulnerable to upward pressure if these holdings
are closed, and with futures seen as markedly "oversold".
"Technical considerations played the biggest factor" in the
last session's rally, "while wet conditions in the southern plains offer a back
drop of support", said Brian Henry at Benson Quinn Commodities.
Mr Feltes added that "cash sources also indicate near-term
stabilisation of world wheat offers", although there are "few takers near term
as buyers anticipate yet another round of lower prices as the northern
hemisphere wheat harvest accelerates.
"Seasonally, wheat typically doesn't bottom until early
July, corn not until mid-July and soybeans in early August."
Still, Mr Henry noted that in the US "producer selling
remains light", another potential support to prices.
The market is also looking forward on Friday to initial
estimates of the Canadian crop from Statistics Canada.